Beating Broke

Options When Consolidating Payday Loans

July 5, 2021 By MelissaB Leave a Comment

Payday loans can trap borrowers in a vicious cycle. Because you’re short on cash and/or have bad credit, you borrow money from a payday lender. That money is usually due back in a short amount of time (often just two weeks). Yet, because of high fees and interest rates on the loan, you must pay back much more than you originally borrowed. If you’re unable to repay the loan in time, you can always roll the amount over into a new loan. This is how the payday loan trap begins. However, you can avoid or escape the payday loan trip by utilizing payday loans consolidation options.

Options When Consolidating Payday Loans

You don’t have to stay stuck in the payday loan trap. Instead, utilize these options to consolidate your payday loans.

Get a 0% APR Credit Card

If you still have good credit, consider applying for a 0% APR credit card. These types of credit cards will allow you to transfer your payday loan balance onto the credit card. Most of these types of cards charge a transfer fee of three to five percent. Then, you have twelve to eighteen months of 0% APR, which means every payment you make goes on the balance, allowing you to pay it off more quickly. After the introductory APR expires, you will pay the stated interest rate on the rest of your balance.

Get a PALs Loan

Another option offered by certain federal credit unions around the country is Payday Alternative Loans. These loans are available for $200 to $1,000 and are to be paid back in full in one to six months.

To qualify for a PALs loan, you must be a member of the credit union for at least one month. The credit union is especially interested in your income rather than your credit score, making these loans easier to qualify for than a 0% APR credit card. In addition, these loans can help build and improve your credit score.

Borrow from Friends or Family

Payday Loans Consolidation Options — Photo by Rajiv Perera on Unsplash

If you don’t qualify for either option already stated, consider borrowing from friends or family. However, if you choose this option, recognize that borrowing money can often ruin relationships. To keep this from happening, write out a contract stating how much you’re borrowing and when you will pay it back. For good faith, state how much you will pay weekly or monthly. If you want, you could even offer to pay back the loan with a bit of interest.

Then, dedicate yourself to paying off this loan as quickly as possible. Nothing ruins a relationship faster than someone who doesn’t pay back a loan to a family member or friend.

Final Thoughts

Payday loans seem like an easy, quick way to borrow money, but they can trap you in an endless cycle of debt. To break that cycle, utilize one of these payday loans consolidation options so you can stop paying so much in interest and pay off what you owe.

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How to Use Retroactive COBRA Insurance

June 21, 2021 By MelissaB Leave a Comment

When my husband quit his job in Illinois to pursue a new job in Arizona, we were shocked that our coverage in Arizona wouldn’t start until a month after his official start date. Since we moved to Arizona a month before his job started, we were without employer-sponsored health insurance for two months. What I wish I would have known then is that you can apply for COBRA insurance retroactively.

What is COBRA Insurance

When you leave a job or lose a job or lose insurance because of a reduction in hours, you can apply for COBRA insurance. If you were enrolled in employer-sponsored insurance and your employer has 20 or more employees, you’re eligible for COBRA insurance. COBRA will give you the exact same insurance coverage you had with your employer. The difference is that you must pay the entire premium yourself.

When you get employer-sponsored insurance, you typically pay only 20 to 30 percent of the total cost of the premium. Your employer pays the rest. With COBRA, you assume the entire amount, which isn’t cheap. We did opt for COBRA insurance when my husband left his job, so we paid $1,200 a month for coverage for our family of five. What I didn’t know then is that I could have utilized retroactive COBRA insurance.

What Is Retroactive COBRA Insurance?

You can choose not to buy COBRA insurance. In our case, we had COBRA insurance for the two months we were between employer-sponsored insurance, but we never used it. We paid $2,400 total over the two months for insurance we didn’t even need.

Another option is to forego COBRA and go without insurance during this time. If you end up having a medical need, you can still sign up for COBRA because COBRA is retroactive from the time you left your job or lost your insurance. For instance, one woman and her husband opted not to get COBRA when they lost insurance benefits. Within a month, her husband had to have an emergency appendectomy. They were facing tens of thousands of dollars in medical bills. The couple completed the forms for COBRA, and the insurance paid the bills for the appendectomy. They ended up paying just $42 out of pocket for the surgery (plus the cost of COBRA).

An Important Caveat

You only have 60 days to decide whether to enroll in COBRA or not. If you opt out of COBRA coverage and need surgery on day 65, you won’t be covered if you try to retroactively apply.

Also, when you retroactively apply, the insurance benefits begin the day after you lose your benefits with your employer, but you also have to pay from that time, too. So, if you sign up for COBRA on day 58, you also have to retroactively pay for days one through 58 of coverage.

Final Thoughts

COBRA coverage can be an important insurance bridge when you’re between jobs. If you want to initially forego COBRA insurance, you can. If a medical need comes up, you can always apply retroactively. But remember, this only applies for the first 60 days you’re without insurance.

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Reasons Why You Need a Will Even When You’re Broke

June 7, 2021 By MelissaB Leave a Comment

You may think that only senior citizens need wills, but that’s not true. People need wills as soon as they have assets they’ll leave behind or when they have a spouse or children. Even the broke need a will if they are leaving dependents behind.

When You Don’t Need a Will

There’s one time in life when you don’t need a will—when you’re single, without children, and in debt without assets. Because there are no assets to divide, you don’t need a will. This would be likely if you’re in college or just out of college, living in an apartment, and have student loan or credit card debt.

Why You Need a Will Even When You’re Broke

There are several reasons why the broke need a will.

Designate Who Will Raise Your Children

If you have children, you can dictate through a will who you want to raise your children in the event that you and your spouse die at the same time (or if your spouse is deceased). If you don’t have a will in place, the state will decide who will become your children’s legal guardian. I’m sure you would rather choose than have the state decide.

Why the Broke Need a Will — Photo by Peter Idowu on Unsplash

You May Not Be as Broke as You Think

Another reason why you need a will is that you may think you’re broke, but you’re not. Take the time to consider all of the assets that you do have.

Potential Assets

For instance, do you have a life insurance policy? Even if you haven’t bought one yourself, often your employer supplies you with some life insurance.

Do you own a home? If so, how much equity do you have in the home?

What about your belongings? Do you own anything of value?

Do you have a retirement account? Again, even if you haven’t set one up independently, do you have one through your employer? If so, how much is the balance?

Most people, when they consider all of these sources, realize that they do indeed have assets. A will helps you designate who will get those assets when you die.

If you have children, you’ll likely want the assets to go to those individuals you’ve asked to raise your children in the event of your death.

How to Create a Will

Now that you’ve decided you likely need a will, you probably think you don’t have enough money to pay for the creation of a will. While hiring a lawyer can be expensive, you can create a will fairly cheaply by using a website service.

My husband and I created our will seven years ago using LegalZoom.com. We answered questions, filled out the form, and then paid $250. When we were done, lawyers looked over the document, and within a week we had our will.

Once you create a will, remember to update it as you have more children or accumulate more debts.

Final Thoughts

If you’re anything but single with no kids, then you need to create a will. No one likes to think about dying, but we’re all going to do so one day. It’s better to take the time now to designate who gets your assets and who will raise your children should you have an untimely death.

Remember, creating a will doesn’t have to be expensive, and your family will be glad you took the time to create one.

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